The Fair Trade Movement – Coffee and Beyond

From around the world, we hear heart-wrenching stories about mistreated and abused workers who earn meager wages. Or worse, we hear about millions of children sold into servitude or forced to work in unsafe conditions for pittance wages to contribute to their family’s survival. Unfortunately, these stories are all too common in the new global economy where competitiveness and profits to stockholders are paramount, and poverty is rising. Increasing globalization, along with U.S. government support for free trade and investment agreements, are exacerbating three intractable problems that now plague almost every nation on earth: income inequalities, job losses and environmental damage.

Backed by conventional economists, large corporations have convinced most of the world’s governments that they should maximize global competitiveness through free trade. Corporate and government officials often theorize that free trade will be beneficial for workers, whose wages and benefits can rise as foreign markets expand for their goods and for consumers who can buy cheap foreign imports. Following this theory, new regional trade agreements, like the North American Free Trade Agreement (NAFTA) and the WTO are reducing barriers to trade and investment for firms. These free trade agreements offer firms global protection for their intellectual and property rights but there are currently no equivalent enforceable global standards to protect workers and the environment.

Furthermore, as barriers to entering local markets are removed, large scale manufacturers edge small businesses, small farmers and local cooperative enterprises out of the market. Local economies suffer when these firms’ profits are channeled out of the country rather than being reinvested locally. According to World Bank figures, roughly half of the new foreign direct investment by global corporations in the South in 1992 quickly left those countries as profits.

Another problem is that the bulk of exports from developing countries tends to be in primary agricultural products, such as sugar, cocoa, coffee, etc., whose prices generally rise much more slowly than the prices of manufactured goods imports. This “terms of trade” decline was particularly sharp between 1985 and 1993 when the real prices of primary commodities fell 30%. Free trade agreements do little to enhance the trading positions and commodity prices of these poor countries. In many cases, the world market price for commodities such as coffee and cocoa falls below the cost of production, forcing farmers to sustain huge losses.

Fair Trade has Never Been More Important

Fair Trade is a movement that began in Europe in the 1980’s as a way to create a link between producers and consumers. This link is used as a mechanism to redirect more of the benefits of trade to producers in developing countries. A structure has evolved where producer groups that meet certain social criteria (for example, cooperative organization with open democratic membership) can apply to be on the register of fair trade producers. North American and European Fair Trade Organization can purchase goods from the groups on the register, assured that the money changing hands is finding its way to those that deserve it. Coffee, tea and crafts were early products to make it on the fair trade market, but the register has grown to encompass other products such as cocoa producers in the Dominican Republic and banana producers in Costa Rica. As popularity and support grows the list will surely expand.

The business generated by Fair Trade Organizations in Europe and the U.S. now accounts for an estimated U.S. $400 million, just .01% of all global trade. Small as it may be, the fair trade movement is setting standards that could redefine world trade to include more social and environmental considerations. Fair traders believe that their system of trade, based on respect for workers’ rights and the environment, can play a big part in reversing the growing inequities and environmental degradation that have accompanied the growth in world trade.

Hilary French, author of Costly Tradeoffs: Reconciling Trade and the Environment, reflects the views of many Fair Trade Organizations: “Trade is neither inherently good nor bad. But how it is conducted is a matter of great concern-and an unprecedented opportunity. Trade can either contribute to the process of sustainable development or undermine it. Given the rapidly accelerating destruction of the earth’s natural resource base, there is no question what the choice must be.”

Fair Trade brings the benefits of trade into the hands of communities that need it most. It sets new social and environmental standards for international companies and demonstrates that trade can indeed be a vehicle for sustainable development. Today, a growing number of workers, environmentalists, consumers, farmers and social movements worldwide are calling for a different framework for trade. They want a global trading system that promotes workers’ rights, protects the environment and sustains the ability of local producers to meet community needs. Together, as consumers, they can make a huge difference by demanding significant changes in the ways goods are produced, and vote with their dollars for a more just and environmentally sound trading system.

1. Corporate Greed – In a world free of borders, manufacturers look for subcontractors where regulations are weak and labor and operating costs are lowest

2. International Policies – Governments like the World Trade Organization (WTO) and the World Bank create international trade laws and lending policies that often allow U.S. corporations to dictate their purchase prices

3. Hunt for the Lowest Price – Retail giants put pressure on their suppliers to keep the cost down, while encouraging consumers to buy more at discounted prices. Where and how the products are made are kept from consumers.

4. The Muddle In the Middle – As the playing field has shifted overseas, the number of middle merchants has increased, with each trying to make a profit form those below them.

5. Squeezed At the Bottom – All these factors pressure factory owners to cut costs. The laborers are forced to work overtime with low wages and punishments or fines for slow work or mistakes.

What You Can Do

* Spread the word about Fair Trade at your school. Get involved in the Student Action campaign. For information and tools, visit: www.fairtraderesource.org

* Buy Fair Trade items on line. Every purchase improves the life of a producer family in Asia, Africa, Latin America or another developing region. Check out www.fairtradefederation.org on-line catalogs